Trucks at Work

Big changes are afoot

Americans are running on empty, with falling home values, rising gas prices, and a lagging economy.” -Shelley Poticha, co-chair of T4 and president and CEO of Reconnecting America.

It‘s been a watershed year by any measuring stick you‘d care to use in just about any area. Take oil: prices spiked at $147.50 a barrel in July, then plunged below $70 per barrel by October. Then the financial sector melts down, causing the stock market to swing by 700 to 900 points over the course of several days. We could add $1 trillion to the federal budget deficit this year ALONE the way things are going, too. Talk about time to cinch the seat belt a little tighter!

Then we have the presidential race - historical by every measure. Either the first ever African American is elected president, or we elect the oldest president ever, the first former prisoner of war to sit in the white house, and the first female vice president. All of this is but the tip of the iceberg of change we‘ve slammed into - with much more to come.

[Now, I predicted Obama would win the presidency in this space way back in January - before the Iowa caucus, back when Hillary Clinton had been practically anointed the Democratic nominee. With the economy the way it is, it‘s looking more and more likely that he‘ll fulfill that prediction ... but as they say in everything, it ain‘t over until a certain large woman bursts into song.]

For truckers, I believe, a whirlwind awaits no matter who gets elected president or which party controls Congress. To use that horribly overdone phrase, this is the time and place where a major “paradigm shift” (oh, I am gritting my teeth upon seeing these words AGAIN!!!) begins to occur. Not just for this industry, but for this country.

We‘ll see more taxes ahead, that‘s for certain - we can‘t avoid them when the deficit is set to reach $11 trillion dollars. We‘ll see far fewer services from government, both at the state and federal level, as cutbacks are an inevitable byproduct of the need to pay down debt. If we are smart, we‘ll see passage of legislation that‘ll a price “floor” for gasoline and diesel at $4 per gallon. That‘ll generate a lot of tax money, take big fluctuations out of fuel prices for more stable trucking fuel surcharges, plus keep people buying fuel-efficient cars and using mass transit.

That‘s a really big deal, because it takes five YEARS for automakers to bring new cars to market. And if we want to keep focused on energy conservation, we‘ve got to give people incentives to stick with change. Month to month fluctuations in buying and commuting habits based on fuel pricing plays hell with establishing trends - and we sure don‘t want to keep lining the pockets of our adversaries in the Middle East, Russia, and Venezuela.

The freight trends for truckers are going to pose difficulties, too. Clifton Beckham, president and CEO of truckload carrier USA Truck down in Van Buren, AR, noted that in comments made in the company‘s third quarter earnings statement.

“Freight availability declined throughout the quarter from its highs in June,” he said. “Although lower diesel fuel prices certainly helped our third quarter earnings, the diesel price decrease prevented some weak carriers from failing or encouraged them to bring on capacity that had been idled, both of which contributed to more competition for less freight.”

Beckham also noted that the crazy trend lines of the past few years - massive fuel cost spikes, pricier equipment due to emission reduction mandates - fostered the creation of new strategic initiatives for USA Truck.

“Our long-term strategic plan calls for a halt to fleet growth until we consistently earn at least a 10% return on capital,” he said. “Our goal is to achieve that return by the end of 2010. We have launched eight supporting initiatives to help attain this goal. These initiatives are designed to help us expand our margins in our asset-intensive trucking operations through more efficient revenue production and cost control ... [while] positioning our business model to resume asset-based growth in 2011 after improving our asset-based margins and by building sizeable asset-light platforms for rail intermodal and truck brokerage services, both of which should produce a higher return on capital.”

And while the economic earthquakes rumbling through the U.S. economy are turning many freight predictors sour (Noël Perry, managing director & senior consultant, FTR Associates, said last week his firm believes a 1.5% to 2% decline in truckload in 2009 is in the offing - which approaches the worst level reached since 1982) there is still hope that truckers who can weather the changes going on today could reap a sunnier tomorrow.

“We realize that the U.S. economy is enormous, and that a tremendous amount of freight must be moved even in a slow-growth or even slightly contracting environment,” said USA‘s Beckham. “Thus, improving industry fundamentals may emerge next year for those trucking companies that weather the difficult times and survive to compete. To that end, we are poised to weather the uncertainty of the next few quarters.”

Hold onto your hats, then - we‘re in the whitewater rapids. Let‘s see if we come out safely on the other side.

[Impertinent editor‘s note: Change is also affecting me and this space as I was recently bequeathed a new laptop with Microsoft‘s VISTA operating system -- complete with wholesale changes to every basic Microsoft program I‘ve used for years. The upshot for you, O Faithful Readers, is that uploading photos to this blog has become impossible for me at the moment. So please bear with me as I labor to master some sea changes of my own. SK.]